Vice Chair Philip N. Jefferson spoke at a Bank of Japan conference, highlighting three global economic developments—energy price rise, AI progress, and trade disruptions—and outlining the outlook for the U.S. economy and monetary policy. The first development is the significant increase in energy prices due to the Middle East conflict, which poses downside risks to growth and upside risks to inflation worldwide. The second is rapid AI advancement, which the Fed views as a productivity driver. The third is disrupted trade flows affecting supply and prices since the pandemic. In the U.S., growth is solid but expected to slow this year as high energy costs weigh on households, the labor market remains broadly stable, and inflation has risen due to energy and tariff changes. The Fed remains committed to a 2 % inflation target, keeping the federal funds rate in the 3.5‑3.75 % range and leaving room to respond to evolving data.
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